If a project's expected return is 15 percent, which represents a 35 percent return in a booming economy and a 5 percent return in a stagnant economy, what is the probability of a booming economy?
A)18.33 percent
B)25.00 percent
C)33.33 percent
D)50.00 percent 15% = 35 %(X) + 5%(1 - X)
10% = 30%X

Question

Quizplus · Accepted Answer

Using the formula given, we can solve for X:
0.15 = 0.35X + 0.05(1 - X)
0.15 = 0.3X + 0.05
0.1 = 0.3X
X = 1/3 or 33.33%
Therefore, the probability of a booming economy is 33.33%, which is option C.

If a Project's Expected Return Is 15 Percent, Which Represents